Malaysia says palm oil dispute with India is 'temporary', will be resolved

Malaysia said on Tuesday that India's move to cut back on palm oil purchases from the Southeast Asian nation is "temporary" and will be resolved amicably between the two nations.

Last month, India restricted imports of refined palm oil and asked importers to avoid purchases from Malaysia after its criticism of India's actions in Kashmir and a new citizenship law.

"Having long-standing bilateral ties, the two nations will overcome the current challenges, and prevail towards mutual and beneficial outcomes," the Malaysian Palm Oil Council said in a statement, citing Primary Industries Minister Teresa Kok.

Malaysia's push to implement B20 biodiesel starting this month will also help sustain high crude palm oil prices, the statement read.

30,000 tonnes of palm oil stuck at Indian ports after curbs on Malaysia

Thousands of tonnes of refined palm oil are delayed or stuck at various Indian ports after the world's biggest edible oil buyer placed restrictions on imports amid a diplomatic row with key supplier Malaysia, multiple sources told Reuters.

India announced the curbs on imports of refined palm oil on Jan 8 in a bid to help domestic refiners raise their plant utilisation rates, according to industry officials familiar with the matter. In a typical year India relies on imports for almost all of its supply of the vegoil used in everything from soap to cookies.

But Malaysia, the world's second-biggest producer and exporter of palm oil, has publicly bridled at New Delhi's move even as India has stepped up orders from Indonesia, according to Refinitiv data. India has been its biggest market for the last five years, and the row sent benchmark Malaysian palm futures to their worst weekly fall in more than 11 years on Friday.

"More than 30,000 tonnes have been stuck at various (Indian) ports. All theses vessels were loaded before the government restricted imports of refined palm oil," said a Mumbai-based vegetable oil dealer, who declined to be named citing company policy.

"Usually customs officials allow unloading of commodities that are in transit before any change in regulation. But in the case of refined palm oil, there is some confusion and that is leading to delays."

A source in New Delhi with direct knowledge of the matter said the restrictions mean importers will need a licence to buy, a tool that could be used to deny or delay shipments from Malaysia. The person declined to be identified citing the sensitivity of the matter.

Another vegetable oil importer said some vessels were stuck at Kolkata port in eastern India, with some others on the west coast. In one incident at Mangalore port on the west coast, crude palm oil was unloaded from a vessel, while refined oil was not permitted ashore, said the importer, who also declined to be named citing the sensitive nature of the situation.

Reuters could not ascertain which vessels contained the cargoes that have been held up at Kolkata and Mangalore, nor who the buyers were. A source in Kuala Lumpur, who requested anonymity citing the sensitivity of the matter, said the refined palm oil was from both Indonesia and Malaysia.

Officials at Kolkata and Mangalore ports did not immediately respond to an email seeking comment.

Malaysia's Sime Darby Plantation, the world's largest oil palm planter by land size, said none of its refined palm oil was stuck at Indian ports. The company, which has operations in both Malaysia and Indonesia, exported more than 436,000 tonnes of refined palm oil to India last year.

Sudhakar Desai, president of Indian Vegetable Oil Producers' Association, said refined palm cargoes that reached before the restrictions were placed had been cleared but none after that.

"We don't think any licenses have been issued for any origin," Desai said.

A spokeswoman for India's trade ministry did not immediately respond to an email from Reuters seeking comment.

'Too small to fight India': Malaysia rules out action over palm oil ban

Malaysia will not take retaliatory trade action against India over its boycott of palm oil purchases amid a political row between the two countries, Prime Minister Mahathir Mohamad said on Monday.

India, the world's largest edible oil buyer, this month effectively halted imports from its largest supplier and the world's second-biggest producer in response to comments from Mahathir attacking India's domestic policies.

"We are too small to take retaliatory action," Mahathir told reporters in Langkawi, a resort island off the western coast of Malaysia. "We have to find ways and means to overcome that," he added.

The 94-year-old premier of Muslim-majority Malaysia has criticised New Delhi's new religion-based citizenship law and also accused India of invading Kashmir. Mahathir again criticised India's citizenship law on Monday, saying he believed it was "grossly unfair".

India has been Malaysia's largest palm oil market for the past five years, presenting the Southeast Asian country with a major challenge in finding new buyers for its palm oil.

Benchmark Malaysian palm futures fell nearly 10% last week, their biggest weekly decline in more than 11 years. New Delhi is also unhappy with Malaysia's refusal to revoke permanent resident status for controversial Indian Islamic preacher Zakir Naik, who has lived in Malaysia for about three years and faces charges of money laundering and hate speech in India.

Mahathir said even if the Indian government guarantees a fair trial, Naik faces the real threat of vigilante action and that Malaysia will only relocate the preacher if it can find a third country where he would be safe.

"If we can find a place for him, we will send him out."

India's palm oil import curbs could trigger Malaysia, Indonesia price war

India's restrictions on imports of refined palm oil will lead to a price war between the world's two biggest suppliers of the commodity, Indonesia and Malaysia, the Palm Oil Refiners Association of Malaysia said on Thursday.

The Indian Ministry of Commerce and Industry issued a notification on Wednesday declaring that the import of refined palm oil "is amended from 'Free' to 'Restricted.'

"This puts Indonesia and Malaysia at loggerheads," Jamil Haron, chairman of Palm Oil Refiners Association of Malaysia, told Reuters. "There will be a price war between Indonesia and Malaysia, and we are at the losing end."

Experts see dip in palm oil imports from one-year high as prices jump

India’s palm oil imports probably declined from a one-year high in October as traders and refiners trimmed buying after higher global prices made overseas supplies more expensive.

Shipments dropped about 12 per cent from a month earlier to 775,000 tons, according to the median of five estimates in a Bloomberg survey of processors, brokers and analysts. That’s the lowest since June. Imports rose to 879,947 tons in September, the highest since September 2018. The Solvent Extractors’ Association of India may release its data this week.

The first decline in three months of growing purchases by India, the world’s biggest importer, may boost inventories in top producers Indonesia and Malaysia. It could also curb a rally in palm oil futures, which surged 16 per cent in October for the best monthly gain since September 2015. After tumbling to a four-year low in July, futures entered a bull market last month, supported by lower stockpiles, strong exports and weaker production.

“There is a disparity in prices and that will reduce imports by India this month as well,” said G. G. Patel, managing partner of GGN Research, an agricultural research company. Palm purchases may total 625,000 tons this month, he said.

Imported crude palm oil is about Rs 1,200 ($17) a ton more expensive than local supplies, while the refined variety from overseas is about Rs 1,000 a ton costlier, Patel said.

Soybean oil purchases, mostly from the U.S., Brazil and Argentina, climbed 34 per cent from a month earlier to 332,000 tons, while sunflower oil imports rose 34 per cent to 170,000 tons, the survey showed. Total vegetable oil imports were little changed at 13 lakh tons, according to the survey.

India eyes more levies on refined palm oil imports to push local processing

India, the world’s biggest buyer of palm oil, is considering a proposal to further increase import taxes on the refined variety to boost local processing and cut dependence on overseas purchases, according to people with knowledge of the matter.

The government is discussing a proposal to impose a new levy in addition to the existing import duty and raise the goods and services tax on the processed tropical oil, the people said, asking not to be identified as the discussions are not public. Rajesh Malhotra, a finance ministry spokesman, declined to comment on the matter.

Such a move by India could reduce refined palm shipments from top producers Indonesia and Malaysia. It may be bearish for benchmark palm prices, which climbed to a 17-month high on Tuesday on a brighter outlook for exports.

India imports about 15 million tons of vegetable oil, including its crude variety, every year to meet domestic consumption of about 25 million tons. The government is now trying to bridge the deficit by giving a fillip to domestic production.

A government-appointed panel on doubling farmers’ income has recommended that efforts should be made to boost local oilseed production to 45 million tons by 2022-23 from 31 million tons now. India’s refined palm oil imports climbed more than 30 per cent from a year earlier to 2.61 million tons in the 11 months ended Sept. 30.

Malaysia offers to increase imports from India after palm oil curbs threat

Malaysia said on Tuesday it would look to increase imports of crude sugar and buffalo meat from India, after reports that New Delhi was considering restricting imports of palm oil from Malaysia following its criticism of its actions in Kashmir.

Malaysia is the world's second largest producer and exporter of palm oil after Indonesia, and the edible oil contributed to 2.8% of its gross domestic product last year. Malaysian palm oil futures fell for a third straight session on Tuesday, hitting their lowest in nearly two weeks.

"These steps will be taken in light of India's importance as our third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($1.63 billion)," Teresa Kok, the Malaysian minister in charge of the palm oil portfolio, said in a statement.

India is one of the biggest producers of sugar and buffalo meat in the world.

Malaysian palm oil futures hit 2-week low after Centre raises import tax

Malaysian palm oil futures closed slightly lower on Thursday, having hit their weakest level in two weeks after top edible oil importer India raised the tax on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months.

The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Excha­n­ge was down 0.2 per cent at 2,182 ri­n­ggit per tonne at the close of trade. It earlier fell as much as 1.1 per cent to 2,163 ringgit, its lowest since August 21.

Palm oil may test support at 2,161 ringgit per tonne, a break below which could cause a fall to 2,114 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.

“Palm prices fell after overnight news of India increasing the refined oil import duty by 5 per cent,” said a Kuala Lumpur-based trader. “This will see the need for Malaysian crude palm oil to compete with Indonesia’s lower prices in order to be competitive.”

India late on Wednesday raised the import tax on refined palm oil from Malaysia to 50 per cent from 45 per cent for six months to curb imports and boost local refining.

The world’s biggest edible oil importer currently imposes a 40 per cent import tax on crude palm oil and 50 per cent on refined palm oil. But since January, refined palm oil shipments from Malaysia to India have been taxed at 45 per cent under an agreement.

Industry players expect the tax hike on refined palm oil to cause Indian buyers to switch to importing crude palm oil.

According to industry players on Thursday, India’s demand for Malaysian refined palm oil is likely to drop sharply in October following the tax hike, curtailing further exports from the Southeast Asian country and leading to higher inventories.

Indonesia traditionally claimed two-thirds of India’s palm oil imports, but in the first half of 2019 Malaysia surpassed Indonesia as the biggest supplier to India due to the duty advantage.

In related oils, US soyoil futures on the Chicago Board of Trade were down 0.1 per cent, and the September soyoil contract on the Dalian exchange fell 0.2 per cent. The Dalian September palm oil contract fell 2.3 per cent.

Palm oil prices are affected by movements in related oils, as they compete for a share in the global vegetable oils market.